Despite this week's worldwide rush to slash interest rates, resistance is growing in Japan to the idea that easing credit is the best way to stave off a deflationary spiral of the kind that gripped the country a decade ago.

Japan's experience during its "lost decade" of recession offers little encouragement to those who believe that co-ordinated rate cuts will revive economies deeply in crisis.

Though Japan took rates down to zero in March 2001, it did not officially claw its way out of deflation until two years ago. It was only then the Bank of Japan felt confident enough to raise rates - to 0.25%. In the current crisis, it has been cautious about participating in the co-ordinated rounds of rate cuts by central banks in the US and Europe.

When the BoJ made its move in March 2001 the objective then, as now, was to ward off long-term deflation and encourage people to spend their way out of trouble. It kept rates at near zero for five years and flooded banks with cash to maintain liquidity. However, many households saved the extra cash and the anticipated economic boost from consumer spending did not occur.

The key rate was raised to a modest 0.25% in July 2006 after the economy showed signs of real recovery, then to 0.5% in February last year. Despite concerns among the BoJ board that a prolonged cut would overstimulate the economy, in October the bank followed the US Federal Reserve and the Bank of England and lowered the rate to 0.3%, the first cut in more than seven years.

A key difference between now and Japan of a decade ago is the speed at which banks in the US, Britain and the eurozone have cut rates. After Japan's stock and property market crash in the early 1990s, the BoJ waited 17 months before cutting rates and did not bring them to below 0.5% until the middle of that decade.